MOSCOW: Russia is attempting to boost its stagnant domestic auto industry by slapping a sharp increase on the duties levied on most imported second-hand cars, media reported on Saturday.

In a decree signed late Friday, Prime Minister Mikhail Kasyanov raised import duties on cars older than seven years to two euros (dollars) per cubic centimetre of engine capacity on cars with an engine size of up to 2,500 cubic metres, and to three euros per cc on cars with a capacity of more than 2,500 cc, Interfax reported.

The increase, for which Russia’s auto constructors had been lobbying strongly, will increase the sale price of middle-range imported second-hand cars by between 1,500 and 2,000 euros, market analysts said.

Duties on imported cars less than three years old remain unchanged at a quarter of cost price, while those on cars aged between three and seven years also remain unchanged at between 0.85 and 1.4 euros per cc according to engine size.

At the demand of President Vladimir Putin and under pressure from the Russian auto industry, Kasyanov approved the principle of increased import duties last month.

A cabinet source quoted by the ITAR-TASS news agency said the increases, more than doubling the previous duties, fell well short of more radical propoals within the administration for a three- or even four-fold increase in import duties.

Last year Russians imported around 450,000 foreign cars, 80 per cent of them second hand.

Around 3.7 million of Russia’s 21.8 million cars are foreign-made, according to figures issued earlier this year.

Russian constructors have complained that the imports, principally of German makes such as Volkswagen, Mercedes and Opel, sell in the same price range of between 4,000 and 8,000 euros as new cars rolling off their production lines.

The Lada-10, for example, representing around one third of sales of market leader Avtovaz, sells for around 6,000 dollars, roughly the same as a four- to six-year old import.

There is a healthy demand for cars in Russia, but production by Russian constructors is stagnant and they are even losing market share, the Moscow-based United Financial Group noted last week at the opening of the annual Moscow motor show.

UGF warned too that Russian constructors, lacking the capacity to increase their production signficantly, might not been able take immediate advantage of a hike in import duties.

Yury Stepanov, Avtovaz vice-chairman, noted that accumulated profits are insufficient to finance our modernation programmes.

However the raising of import barriers is likely to add lustre to the Russian auto industry as a target for foreign investors, analysts said.

The market is set to grow as living standards edge upwards. According to official figures, Russia has only 140 cars per 1,000 inhabitants, compared with 550 in the United States or 410 in Spain.

Foreign constructors, notably the Germans, French constructors such as Renault and Peugeot, or the South Koreans Daewoo, have already established a toe-hold in the market.

Handicapped by poor public perception of their brand names, several Russian firms are looking to increase their cooperation with foreign partners.

Last week, Avtovaz said that following the launch of a Neva-Chevrolet all-terrain vehicle in September, it planned to join with General Motors in assembling the Opel Astra model in Russia next year.

The market number two GAZ, which saw its production fall last year to 81,000 vehicles and is currently undergoing restructuring, said it may abandon production of the Volga line in the next six or seven years in favour of a new model to be built in collaboration with a foreign company.